Delta Air Lines (DAL) beats Q3 earnings expectations

Delta Air Lines Inc. (NYSE: DAL) topped earnings estimates for the third quarter of 2019 while revenues matched expectations. However, shares fell 3.6% in premarket hours on Thursday as the company’s profit outlook fell short of analysts’ estimates.

Total operating revenue grew 5% year-over-year to $12.6 billion, in line with consensus estimates.

Net income rose 13% to $1.5 billion, or $2.31 per share, compared to the prior-year period. Adjusted EPS jumped 29% year-over-year to $2.32, beating forecasts of $2.26.  

Total adjusted revenue, which excludes refinery sales, grew
6.5% to $12.6 billion, driven by a 9% increase in premium product ticket
revenue as well as increases in loyalty and third-party maintenance revenue, as
the company served a record 55.2 million passengers in the quarter. Cargo
revenues fell 17% due to lower volumes and yield.

During the quarter, the Domestic, Atlantic and Latin regions saw revenue increases driven by higher capacity and unit revenue. In the Pacific region, revenues declined 4.6%, mainly due to a 7.6% decline in unit revenues caused by weaker macroeconomics, trade uncertainty and currency headwinds.

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In the third quarter, revenue passenger miles
increased 5.6% while available seat miles improved 3.9%. Passenger revenue per
available seat mile (PRASM) was up 1.7% while total revenue per available seat
mile (TRASM) rose 1.1%. Adjusted unit revenue was up 2.5%.

Operating cost per available seat mile (CASM) was down 2.1% while CASM-Ex was up 2.4%. Passenger load factor improved by 1.4 points to 88.3%. Average price per fuel gallon decreased 12.2% to $1.94. On an adjusted basis, average price per fuel gallon was down 11.5% to $1.96.

For the fourth quarter of 2019, the company expects EPS to
come in a range of $1.20-1.50. Analysts had forecast Q4 2019 EPS of $1.51.

Adjusted TRASM is estimated to grow 0-2% while CASM-Ex is expected to increase 4-5% year-over-year. System capacity is projected to rise around 4.5% year-over-year. Fuel price, including taxes and refinery impact, is expected to come in the range of $2.00-2.20.

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Delta has declared a quarterly dividend of $0.4025
per share, payable on November 14, 2019 to shareholders of record as of October
24, 2019.

During the quarter, Delta entered into a strategic partnership with LATAM Airlines, under which the company will invest $1.9 billion for a 20% stake in LATAM. Delta will also acquire four A350 aircraft from LATAM, and has agreed to assume LATAM’s commitment to purchase 10 additional A350 aircraft. Delta expects the transaction to be accretive to EPS over the next two years but does not expect it to impact existing financial commitments.

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